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Senate Republicans return to Washington this week after a 10-day recess facing a key inflection point in their effort to repeal and replace the Affordable Care Act (ACA) as GOP leaders will outline policy options they hope can unify their fragmented caucus.

None of the options is a silver bullet, and each effort to appeal to one group of Republicans risks triggering new opposition from another. Majority Leader Mitch McConnell faces the seemingly herculean task of fashioning legislation that can satisfy at least 50 senators, allowing Vice President Pence to cast the tie-breaking vote to pass a repeal-and-replace bill. McConnell’s margin for error is narrow as Republicans hold 52 Senate seats.

Among the policy choices Republicans will begin weighing this week is postponing ACA repeal until 2020 to allow Congress additional time to draft an overhaul of the law. Under that plan, the Senate would provide additional subsidies to try to stabilize individual insurance premiums and to incentivize insurers to return to states they’ve abandoned. Most Republicans would likely view punting for two years as a viable alternative only to doing nothing.

Senators also will discuss slowing the phase out of the ACA’s Medicaid expansion, in a nod to the 16 GOP governors who accepted federal funding to increase their programs. Several key Republican senators, led by Sen. Rob Portman (R-Ohio), are working to protect their states’ expanded Medicaid programs, while other senators would support keeping the expanded programs but with lower federal contributions.

Other options include shoring up the insurance exchanges, but senators could get tripped up as they decide whether to include House-passed language that prohibits subsidies for insurance plans that include abortion coverage.

Some GOP senators say they need to keep – or delay the repeal of – the ACA’s taxes on providers and individuals. Those lawmakers say the tax revenue would be needed to finance new subsidies to insurers for covering patients with pre-existing conditions or for keeping expanded Medicaid coverage. But Finance Committee Chairman Orrin Hatch (R-Utah), in a speech on the Senate floor before the recess, warned of a political backlash if the party failed to repeal the ACA taxes after “spending the better part of a decade railing against Obamacare’s burdensome, job-killing taxes.”

McConnell wants a Senate vote on the GOP’s healthcare plan in June, but Republicans will be hard pressed to meet that deadline. Even after Republicans coalesce on the underlying policy – and they’re not close to doing that – the legislation will need to undergo a thorough analysis by the Congressional Budget Office (CBO). Depending on how much Senate Republicans change the House-passed bill, that CBO review could take a week or longer.

The CBO analysis will be an important benchmark for the Senate parliamentarian, who will largely set the ground rules for how the healthcare bill will be debated on the Senate floor. Republicans are using a legislative procedure called budget reconciliation for their bill. The principal advantage of reconciliation is that the GOP can pass the bill with a simple majority, not the usual 60 votes needed to approve legislation.

The downside is that not every provision is eligible to be included in a reconciliation bill, which generally is confined to policies that have direct impact on government spending. So that means Republicans can repeal ACA taxes and subsidies but cannot include medical liability reform or provisions allowing insurers to sell policies across state lines. The nonpartisan parliamentarian effectively decides what’s in and what’s out, and overturning her rulings requires 60 votes.

Despite McConnell’s push for a vote before the scheduled Fourth of July recess, all signs point to a more likely timetable for a vote after that holiday and before the beginning of the month-long August recess.

Price to Face Budget Hot Seat on Capitol Hill

HHS Secretary Tom Price is expected to face double-barreled scrutiny Thursday when he testifies before two congressional tax-writing committees about his department’s fiscal 2018 budget request. Price will testify before the Senate Finance Committee on Thursday morning and the House Ways and Means Committee that afternoon.

Lawmakers in both parties are expected to sharply question Price over the Trump administration’s budget proposal. It calls for sharp spending reductions for several healthcare agencies and programs, including NIH, FDA, CDC and substance abuse programs.

Trump’s budget would reduce future increases in Medicaid spending by $610 billion over 10 years. The federal government last year spent $368 billion on Medicaid, and even with its lower projected spending the Trump budget forecasts Medicaid spending will almost double in 10 years to $688 billion.

Republicans and Democrats have questioned Trump’s spending priorities, including for NIH and FDA. It’s unlikely many of Trump’s proposed healthcare spending cuts will find support in Congress.

Timing Unclear on Advancing FDA User Fee Bills

House and Senate leaders have not yet announced a timeline for considering separate legislation to reauthorize the user fees that drug and medical device companies pay to support FDA product reviews.

Senate leaders haven’t set a schedule for floor consideration as the Senate HELP Committee continues to try to strike a bipartisan agreement that would limit floor amendments. But there’s also worry that some Democrats may try to hijack the usually bipartisan user fee renewal because of Republicans’ separate effort on repealing the ACA.

In the House, the Energy and Commerce Committee is expected to hold a vote this week on its plan, although a formal notice had not been announced as of this morning.

The Trump administration is still pressing its plan to substantially increase industry user fees and ratchet down government spending for FDA. But the current five-year user fee plan expires Sept. 30, and key lawmakers in both parties have said there isn’t time to re-open the pending agreement, which FDA and industry representatives negotiated over nearly two years.

House GOP Questions Expansion of 340B Drug Discounts

The House Energy and Commerce Committee last week initiated an investigation of the 340B drug discount program, questioning whether the federal agency responsible for the program is effectively overseeing it.

The committee sent a letter last week to the Health Resources and Services Administration (HRSA), asking the agency to provide information on its fiscal 2015 and 2016 audits of hospitals and other covered providers. The letter was signed by committee Chairman Greg Walden (R-Ore.), Health Subcommittee Chairman Michael Burgess (R-Texas), and Oversight and Investigations Subcommittee Chairman Tim Murphy (R-Pa.).

The lawmakers said they were “concerned about the 340B program’s rapid growth without additional and proportional oversight.” Sales of outpatient drugs under the 340B program more than doubled between 2010 and 2015 and expanded by 66 percent between 2013 and 2015 alone, the committee said. As of 2011, nearly a third of all U.S. hospitals participated in the program.

Although Congress in recent years has questioned whether hospitals and other participating facilities are appropriately using the 340B savings, the committee’s letter focused squarely on HRSA. The committee said the agency’s “lack of follow-up audits when it finds violations is troubling,” and the high rate of hospital noncompliance “indicates a need for additional oversight of this program.”

Panel to Examine Medicare Advantage Care Payment Models

The House Ways and Means Health Subcommittee will hold a hearing Wednesday to review Medicare Advantage programs that serve high-cost, high-need beneficiaries with integrated care and value-based models. Subcommittee Chairman Pat Tiberi (R-Ohio) said the committee is examining Special Needs Plans and other Medicare Advantage models like the Program for All-Inclusive Care. He said the panel is interested in new models that allow for increased flexibility and value-based insurance design focused on delivering integrated and coordinated care for seniors and people living with disabilities. The committee has not announced the names of the witnesses who will be testifying at the hearing.

Grassley: Mylan Overcharged Taxpayers

Senate Judiciary Committee Chairman Charles Grassley (R-Iowa) last week accused Mylan of “gaming the system” as he released an independent report that found taxpayers overpaid the company by $1.2 billion for its anti-allergy device EpiPen. The report, by the HHS inspector general, found Mylan had for years misclassified EpiPen as a generic drug rather than a brand-name product – allowing the company to bypass significant discounts it was required to pass on to Medicaid beneficiaries.

The company last year agreed to pay the government $465 million to settle claims that it overcharged taxpayers. Grassley had been critical of that arrangement, saying at the time the settlement was far short of the amount overcharged to taxpayers. The senator said he is continuing his review, including why CMS didn’t follow up with Mylan after the agency told the company it was misclassifying EpiPen as a generic drug.

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